Optimal adjustment to trade shocks under alternative development strategies

Abstract

The techniques of stochastic control are applied to a CGE model of Turkey to compare the robustness of alternative development strategies to disruptions like the 1979 oil shock. The use of instruments and the extent of deviation of state variables from their target values are compared under three different objective functions (growth, stabilization or equality) and three different development strategies (export expansion, agricultural development led industrialization, or import-substitution). We find that the results are sensitive to both development strategies and objectives. © 1989